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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission File Number 1-10945
OCEANEERING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2628227
- ---------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11911 FM 529
Houston, Texas
77041
-----------------------------------
(Address of principal executive offices)
(Zip Code)
(713) 329-4500
-----------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-----------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 26, 2002
- ----------------------------- ----------------------------
Common Stock, $.25 Par Value 24,760,487 shares
PAGE 1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, Dec. 31,
2002 2001
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 26,454 $ 10,474
Accounts receivable, net of allowance
for doubtful accounts of $1,305 and $1,349 143,868 154,364
Prepaid expenses and other 45,251 40,380
--------- ---------
Total current assets 215,573 205,218
--------- ---------
Property and Equipment, at cost 577,839 573,738
Less: accumulated depreciation (249,651) (231,402)
--------- ---------
Net property and equipment 328,188 342,336
--------- ---------
Goodwill, net of amortization of $9,225 and $9,221 14,282 13,884
--------- ---------
Other Assets 19,910 18,173
--------- ---------
TOTAL ASSETS $ 577,953 $ 579,611
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 26,764 $ 28,902
Accrued liabilities 71,444 74,193
Income taxes payable 15,223 10,739
--------- ---------
Total current liabilities 113,431 113,834
--------- ---------
Long-term Debt, net of current portion 120,000 170,000
--------- ---------
Other Long-term Liabilities 43,889 44,344
--------- ---------
Commitments and Contingencies
Shareholders' Equity 300,633 251,433
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 577,953 $ 579,611
========= =========
See Notes to Consolidated Financial Statements.
PAGE 2
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
(in thousands, except per share amounts)
Revenue $ 141,549 $ 132,223 $ 280,398 $ 236,477
Cost of Services and Products 110,782 107,482 220,888 190,932
---------- ---------- ---------- ----------
Gross margin 30,767 24,741 59,510 45,545
Selling, General and Administrative Expenses 11,488 10,619 22,399 21,135
---------- ---------- ---------- ----------
Income from operations 19,279 14,122 37,111 24,410
Interest Income 134 124 204 205
Interest Expense, net of capitalized interest of
$585 and $1,930 in the three- and six-month
periods in 2001 (2,355) (2,624) (4,682) (4,503)
Other Income (Expense), Net (883) 251 (770) (233)
---------- ---------- ---------- ----------
Income before income taxes 16,175 11,873 31,863 19,879
Provision for Income Taxes (5,661) (4,156) (11,152) (6,958)
---------- ---------- ---------- ----------
Net Income $ 10,514 $ 7,717 $ 20,711 $ 12,921
========== ========== ========== ==========
Basic Earnings per Share $ 0.43 $ 0.33 $ 0.85 $ 0.55
Diluted Earnings per Share $ 0.42 $ 0.32 $ 0.84 $ 0.54
Weighted average number of common shares 24,667 23,464 24,347 23,313
Incremental shares from stock options 393 558 407 523
Weighted average number of common shares and
equivalents 25,060 24,022 24,754 23,836
See Notes to Consolidated Financial Statements.
PAGE 3
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended
June 30,
--------------------------
2002 2001
---------- ----------
(in thousands)
Cash Flows from Operating Activities:
Net Income $ 20,711 $ 12,921
---------- ----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 25,243 20,993
Currency translation adjustments and other 5,812 (834)
Increase (decrease) in cash from:
Accounts receivable 10,496 (31,183)
Prepaid expenses and other current assets (4,596) (7,033)
Other assets (379) (137)
Current liabilities 437 15,215
Other long-term liabilities 1,695 1,350
---------- ----------
Total adjustments to net income 38,708 (1,629)
---------- ----------
Net Cash Provided by Operating Activities 59,419 11,292
---------- ----------
Cash Flows from Investing Activities:
Purchases of property and equipment and other (8,836) (27,829)
---------- ----------
Net Cash Used in Investing Activities (8,836) (27,829)
---------- ----------
Cash Flows from Financing Activities:
Net proceeds from (payments of) revolving credit and other long-term debt (50,000) 9,927
Proceeds from issuance of common stock 15,397 7,612
---------- ----------
Net Cash Provided by (Used in) Financing Activities (34,603) 17,539
---------- ----------
Net Increase in Cash and Cash Equivalents 15,980 1,002
Cash and Cash Equivalents - Beginning of Year 10,474 9,911
---------- ----------
Cash and Cash Equivalents - End of Period
$ 26,454 $ 10,913
========== ==========
See Notes to Consolidated Financial Statements.
PAGE 4
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Significant Accounting Policies
These consolidated financial statements are unaudited, have been
prepared pursuant to instructions for the Quarterly Report on Form 10-Q
required to be filed with the Securities and Exchange Commission and do
not include all information and footnotes normally included in
financial statements prepared in accordance with generally accepted
accounting principles. These financial statements reflect all
adjustments that Oceaneering's management believes are necessary to
present fairly Oceaneering's financial position at June 30, 2002 and
its results of operations and cash flows for the periods presented. All
such adjustments are of a normal and recurring nature. The financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in Oceaneering's Annual
Report on Form 10-K for the year ended December 31, 2001. The results
for interim periods are not necessarily indicative of annual results.
2. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
June 30, Dec. 31,
2002 2001
-------- --------
(in thousands)
Spare parts for remotely operated vehicles $ 13,408 $ 14,316
Inventories, primarily raw materials 15,944 9,385
Deferred taxes 10,634 10,359
Other 5,265 6,320
-------- --------
Total $ 45,251 $ 40,380
======== ========
3. Debt
Long-term Debt consisted of the following:
June 30, Dec. 31,
2002 2001
-------- --------
(in thousands)
6.72% Senior Notes $100,000 $100,000
Revolving credit facility -- 23,000
Term Loan agreement 20,000 47,000
-------- --------
Total $120,000 $170,000
======== ========
During the quarter ended June 30, 2002, Oceaneering prepaid $21 million
of the principal owed under its Term Loan agreement. As a result of the
prepayment, the remaining scheduled maturities of the Term Loan
changed. Oceaneering had an interest rate hedge in place that
effectively fixed LIBOR at 3.24% for the Term Loan. Oceaneering revised
the hedge to match the rescheduled maturities of the Term Loan.
Oceaneering charged $118,000 to interest expense in the three- and
six-month periods ended June 30, 2002 as a result of this change.
Scheduled maturities of Long-term Debt as of June 30, 2002 were as
follows:
Revolving
(in thousands) 6.72% Notes Credit Facility Term Loan Total
-------------- ----------- --------------- --------- --------
Remainder of 2002 $ -- $ -- $ 2,400 $ 2,400
2003 -- -- 4,800 4,800
2004 -- -- 12,800 12,800
2005 -- -- -- --
2006 20,000 -- -- 20,000
Thereafter 80,000 -- -- 80,000
----------- -------- --------- --------
Total $ 100,000 $ -- $ 20,000 $120,000
=========== ======== ========= ========
Maturities before June 2003 are not classified as current as of June
30, 2002 since Oceaneering can extend the maturity by borrowing under
the revolving credit facility with a maturity date after one year.
PAGE 5
4. Shareholders' Equity
Shareholders' Equity consisted of the following:
June 30, Dec. 31,
2002 2001
-------- --------
(in thousands)
Common Stock, par value $0.25;
90,000,000 shares authorized; 24,756,737 and
24,017,046 shares issued $ 6,189 $ 6,004
Additional paid-in capital 100,443 84,105
Treasury stock; 249,872 shares in 2001, at average cost -- (3,353)
Retained earnings 205,626 184,915
Other comprehensive income (11,625) (20,238)
-------- --------
Total shareholders' equity $300,633 $251,433
======== ========
5. Income Taxes
Cash taxes paid were $5.9 million and $5.4 million for the six months
ended June 30, 2002 and 2001, respectively.
6. Business Segment Information
Oceaneering supplies a comprehensive range of technical services and
specialty products to customers in a variety of industries.
Oceaneering's Offshore Oil and Gas business consists of four business
segments: Remotely Operated Vehicles ("ROVs"), Subsea Products, Mobile
Offshore Production Systems and Other Services. Oceaneering's Advanced
Technologies business is a separate segment that provides project
management, engineering services and equipment for applications outside
the oil and gas industry.
There are no differences in the basis of segmentation or in the basis
of measurement of segment profit or loss from those used in
Oceaneering's consolidated financial statements for the year ended
December 31, 2001. The following summarizes certain financial data by
business segment:
For the Three Months Ended For the Six Months Ended
---------------------------------------- -------------------------
June 30, June 30, March 31, June 30, June 30,
2002 2001 2002 2002 2001
---------- ---------- ---------- ---------- ----------
(in thousands)
Revenue
Offshore Oil and Gas
ROVs $ 37,616 $ 40,584 $ 36,136 $ 73,752 $ 72,818
Subsea Products 36,458 27,194 32,558 69,016 49,355
Mobile Offshore Production Systems 12,474 11,130 12,227 24,701 18,109
Other Services 32,440 27,722 31,121 63,561 47,489
---------- ---------- ---------- ---------- ----------
Total Offshore Oil and Gas 118,988 106,630 112,042 231,030 187,771
Advanced Technologies 22,561 25,593 26,807 49,368 48,706
---------- ---------- ---------- ---------- ----------
Total $ 141,549 $ 132,223 $ 138,849 $ 280,398 $ 236,477
========== ========== ========== ========== ==========
Gross Margins
Offshore Oil and Gas
ROVs $ 9,852 $ 12,544 $ 8,553 $ 18,405 $ 22,376
Subsea Products 7,832 259 6,223 14,055 3,287
Mobile Offshore Production Systems 4,419 2,591 5,443 9,862 4,445
Other Services 4,870 4,659 5,018 9,888 6,731
---------- ---------- ---------- ---------- ----------
Total Offshore Oil and Gas 26,973 20,053 25,237 52,210 36,839
Advanced Technologies 3,794 4,688 3,506 7,300 8,706
---------- ---------- ---------- ---------- ----------
Total $ 30,767 $ 24,741 $ 28,743 $ 59,510 $ 45,545
========== ========== ========== ========== ==========
PAGE 6
7. Comprehensive Income
Comprehensive income is the total of net income and all nonowner
changes in equity. The amounts of comprehensive income for the three-
and six-month periods ended June 30, 2002 and 2001 are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2002 2001 2002 2001
-------- -------- -------- --------
(in thousands)
Net Income per Consolidated Statements of Income $ 10,514 $ 7,717 $ 20,711 $ 12,921
Foreign Currency Translation Gains (Losses) 9,838 (2,090) 8,796 (5,329)
Change in Fair Value of Interest Rate Hedge (442) -- (183) --
-------- -------- -------- --------
Comprehensive Income $ 19,910 $ 5,627 $ 29,324 $ 7,592
======== ======== ======== ========
Amounts comprising other elements of comprehensive income in
Shareholders' Equity:
June 30, 2002 December 31, 2001
------------- -----------------
(in thousands)
Accumulated Net Foreign Currency Translation Adjustments $(11,506) $(20,302)
Fair Value of Interest Rate Hedge (119) 64
-------- --------
$(11,625) $(20,238)
======== ========
8. New Accounting Standards
In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 requires the use of the purchase
method of accounting for all business combinations entered into after
June 30, 2001. SFAS No. 141 also specifies criteria intangible assets
must meet to be recognized and reported apart from goodwill. SFAS No.
142 changes the accounting method for goodwill from an amortization to
an impairment-only approach. SFAS No. 142 was effective for
Oceaneering's quarter ended March 31, 2002, and early adoption of this
statement was not permitted. Oceaneering completed the impairment tests
of goodwill as of January 1, 2002 and determined that its goodwill is
not impaired. Goodwill amortization expense was $316,000 and $633,000
for the three- and six-month periods ended June 30, 2001.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
All statements in this Form 10-Q, other than statements of historical facts,
including, without limitation, statements regarding our business strategy, plans
for future operations and industry conditions, are forward-looking statements
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to various
risks, uncertainties and assumptions, including those we refer to under the
headings "Business -- Risks and Insurance" and "Cautionary Statement Concerning
Forward-Looking Statements" in Part I of our Annual Report on Form 10-K for the
year ended December 31, 2001. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, because of the
inherent limitations in the forecasting process, as well as the relatively
volatile nature of the industries in which we operate, we can give no assurance
that those expectations will prove to be correct. Accordingly, evaluation of our
future prospects must be made with caution when relying on forward-looking
information.
Material Changes in Financial Condition
We consider our liquidity and capital resources adequate to support our
operations and capital commitments. At June 30, 2002, we had working capital of
$102 million. Additionally, we had $80 million of borrowing capacity available
under our revolving credit facility.
Our capital expenditures were $12 million during the six months ended June 30,
2002, as compared to $28 million during the corresponding period of last year.
Capital expenditures in the current year consisted of expenditures relating to
the addition of units to our fleet of ROVs to replace older units we retired.
Prior-year expenditures consisted of final costs related to the conversion of a
jackup drilling rig to a mobile production unit, the Ocean Legend, and additions
to our fleet of ROVs.
We had no material commitments for capital expenditures at June 30, 2002.
PAGE 7
At June 30, 2002, we had long-term debt of $120 million and a 29% debt-to-total
capitalization ratio. We have $100 million of Senior Notes outstanding, to be
repaid from 2006 through 2010. We have an $80 million revolving credit facility,
under which we had no outstanding borrowings and $80 million available for
future borrowings at June 30, 2002. This facility is scheduled to expire in
October 2003. We also have a term loan facility that is to be repaid through
April 2004. At June 30, 2002, we had $20 million in outstanding borrowings under
the term loan facility. Both the revolving credit and term loan facilities have
short-term interest rates that float with market rates, plus applicable spreads.
We have effectively fixed the interest rate on the term loan at approximately 4%
through an interest rate swap. We have no off balance sheet debt and have not
guaranteed any debt not reflected on our consolidated balance sheets.
Results of Operations
We operate in five business segments. The segments are contained within two
businesses - services and products provided to the offshore oil and gas industry
("Offshore Oil and Gas") and all other services and products ("Advanced
Technologies"). Our segments within the Offshore Oil and Gas business are
Remotely Operated Vehicles ("ROVs"), Subsea Products, Mobile Offshore Production
Systems and Other Services. We report our Advanced Technologies business as one
segment.
Consolidated revenue and margin information is as follows:
For the Three Months Ended For the Six Months Ended
---------------------------------------- -------------------------
June 30, June 30, March 31, June 30, June 30,
2002 2001 2002 2002 2001
---------- ---------- ---------- ---------- ----------
(in thousands)
Revenue $ 141,549 $ 132,223 $ 138,849 $ 280,398 $ 236,477
Gross margin 30,767 24,741 28,743 59,510 45,545
Gross margin % 22% 19% 21% 21% 19%
Operating margin % 14% 11% 13% 13% 10%
Our Offshore Oil and Gas business results are influenced by the level of capital
spending by oil and gas companies in the offshore sector, particularly in
deepwater, that is, at water depths of 1,000 feet or more. In the first half of
2002, we have seen a decrease in deepwater exploration activity, particularly in
the Gulf of Mexico. We expect this trend to reverse later in 2002 or 2003.
We generate a material amount of our consolidated revenue from contracts for
marine services in the Gulf of Mexico and North Sea, which are usually more
active from April through November compared to the rest of the year. However,
our exit from the diving sector in the North Sea in early 1998 and the
substantial number of multiyear ROV contracts that we entered into since
calendar year 1997 have reduced the seasonality of our Other Services and ROV
operations. Revenues in our Mobile Offshore Production Systems, Subsea Products
and Advanced Technologies segments are generally not seasonal.
PAGE 8
OFFSHORE OIL AND GAS
The table below sets forth our revenues and gross margins for our Offshore Oil
and Gas business for the periods indicated.
For the Three Months Ended For the Six Months Ended
------------------------------------- ------------------------
June 30, June 30, March 31, June 30, June 30,
2002 2001 2002 2002 2001
-------- -------- --------- -------- --------
(in thousands, except for percentages)
ROVs
Revenue $ 37,616 $ 40,584 $ 36,136 $ 73,752 $ 72,818
Gross margin 9,852 12,544 8,553 18,405 22,376
Gross margin % 26% 31% 24% 25% 31%
Work class utilization % 70% 79% 70% 70% 75%
Subsea Products
Revenue $ 36,458 $ 27,194 $ 32,558 $ 69,016 $ 49,355
Gross margin 7,832 259 6,223 14,055 3,287
Gross margin % 21% 1% 19% 20% 7%
Mobile Offshore Production Systems
Revenue $ 12,474 $ 11,130 $ 12,227 $ 24,701 $ 18,109
Gross margin 4,419 2,591 5,443 9,862 4,445
Gross margin % 35% 23% 45% 40% 25%
Other Services
Revenue $ 32,440 $ 27,722 $ 31,121 $ 63,561 $ 47,489
Gross margin 4,870 4,659 5,018 9,888 6,731
Gross margin % 15% 17% 16% 16% 14%
Total Offshore Oil and Gas
Revenue $118,988 $106,630 $ 112,042 $231,030 $187,771
Gross margin 26,973 20,053 25,237 52,210 36,839
Gross margin % 23% 19% 23% 23% 20%
ROV segment gross margin had been increasing over the past several years due to
both additional units available for service and higher utilization rates. The
higher utilization rates had resulted from the return to service of more
floating drilling rigs and a rise in offshore construction-related activities.
This trend reversed in the first quarter of 2002 as there was weakness in the
semi-submersible drilling market, particularly in the Gulf of Mexico where we
have a large market share of ROV drill support. Our ROV revenues and margins
slightly improved in the second quarter over the first quarter, although not to
the levels of the second quarter of 2001. The improvement was primarily achieved
in our foreign operations. We are forecasting ROV results similar to those of
the second quarter for each of the third and fourth quarters of 2002.
Our Subsea Products results improved over the corresponding periods of the prior
year because our umbilical plants are now producing under contracts that were
awarded in improved market conditions. During the first half of 2001, we were
producing a large steel tube umbilical order, the largest umbilical contract we
had ever undertaken, at a loss. It was bid and undertaken during a period of
reduced demand. The completion of this project in the first half of 2001 freed
up capacity at our U.K. plant for profitable work. Our Subsea Products gross
margin percentage increased from the immediately preceding quarter, as our U.K.
plant had more thermoplastic umbilical work on which we generally earn higher
margin percentages, as compared to steel tube umbilicals, due to lower
subcontractor content. While our outlook for the Subsea Products segment is
highly positive based on the projected growth in subsea wellhead completions, we
anticipate this segment's results will be slightly lower in the second half of
2002 as compared to the first half based on our reduced level of backlog of $45
million at June 30, 2002 as compared to $61 million at December 31, 2001.
Our Mobile Offshore Production Systems gross margins were higher than the
corresponding periods of 2001. The Ocean Producer began operations in the fourth
quarter of 2001 under a new seven-year contract, which has been providing higher
revenues and margins than its prior contract. The Ocean Legend began receiving
partial dayrate in the first quarter of 2001 and began receiving full dayrate
mid-second quarter of 2001. As a result of brief operating problems during the
third and fourth quarters of 2001, the first quarter of 2002 was the first
quarter in which we achieved full dayrate for an entire quarter from the Ocean
Legend. We feel we are entitled to a portion of the third and fourth quarter
2001 dayrate that we have not recognized as revenue, and we are negotiating a
settlement with our customer. During the second quarter of 2002, our customer
exercised its option to extend
PAGE 9
the Ocean Legend contract for an additional two years. As a result, our revenue
and margin on this contract decreased by approximately $19,000 per day, for four
years from mid-May 2002, as compared to the first quarter of 2002. As a result
of the Ocean Legend contract change, gross margin was less than the first
quarter of 2002 and we anticipate lower revenue and gross margin for the balance
of 2002 as compared to the first half. Because we performed a low margin project
management contract in the second quarter, revenue was relatively flat as
compared to the first quarter of 2002.
For our Other Services segment, the three- and six-month periods of 2001
included $2.3 million and $3.1 million, respectively, of gross margin related to
the wind-up of our foreign vessel and diving operations. From our current
operations, a significant improvement in offshore activity in the Gulf of Mexico
contributed to the increase in Other Services gross margins for the three- and
six-month periods ended June 30, 2002. We experienced an increase in utilization
of and profitability from our two Gulf of Mexico Ocean Intervention
multi-service vessels in the three- and six-month periods of 2002 compared to
the corresponding periods of 2001. Additionally, gross margin improved as a
result of a significant engineering and specialized diving contract, and, to a
lesser extent, from topside inspection services. We believe that for 2002 our
Other Services segment will earn more revenue at higher margins than it did in
2001. Currently, we project this segment's results for the second half of 2002
to be lower than achieved in the first half as a result of a soft vessel market
in the Gulf of Mexico due to the low level of offshore industry activity being
experienced at this time.
ADVANCED TECHNOLOGIES
Revenue and gross margin information is as follows:
For the Three Months Ended For the Six Months Ended
------------------------------------- ------------------------
June 30, June 30, March 31, June 30, June 30,
2002 2001 2002 2002 2001
-------- -------- --------- -------- --------
(in thousands, except for percentages)
Revenue $ 22,561 $ 25,593 $ 26,807 $ 49,368 $ 48,706
Gross margin 3,794 4,688 3,506 7,300 8,706
Gross margin % 17% 18% 13% 15% 18%
Advanced Technologies revenues and margins were down in the three- and six-month
periods of 2002 as compared to the corresponding periods of 2001 from lower
levels of activities from our telecommunications cable ROV services and from our
space division as a result of lower NASA spending. Gross margin was higher than
the immediately preceding quarter from lower repair and maintenance expenses in
our ROV cable operations. We expect further improvement in this segment's
results for the second half of 2002 based on new orders received from the U.S.
Navy and from the theme park industry.
OTHER
Our equity in the earnings (loss) of our telecommunications joint venture was
$(429,000) and $(37,000) for the three and six months ended June 30, 2002,
compared to $345,000 and $722,000 for the three and six months ended June 30,
2001. The telecommunications cable lay and burial market is suffering from
reduced demand for services, and weak market conditions are expected to continue
at least through the balance of 2002.
Interest expense for the six months ended June 30, 2002 increased compared to
the corresponding period of the prior year as interest on the construction of
the Ocean Legend was capitalized until it was placed in service during the
second quarter of 2001. Our debt had been incurred to fund the acquisition of
additional equipment, including the Ocean Legend, and expansion of our Subsea
Products production capacity. Interest expense for the quarter ended June 30,
2002 was lower than that of the quarter ended June 30, 2001 as a result of lower
debt levels. Interest expense of $2,624,000 and $4,503,000 for the three and six
months ended June 30, 2001 was net of capitalized interest of $585,000 and
$1,930,000.
Other expense in the first half of 2001 included the first quarter write-off of
$600,000 related to the shares of Friede Goldman Halter, Inc. we received as
proceeds for the sale of an out-of-service jackup rig in the fourth quarter of
1999. Friede Goldman Halter, Inc. filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code on April 19, 2001. Friede Goldman
Halter, Inc. was delisted from the New York Stock Exchange on April 19, 2001.
The provisions for income taxes were related to U.S. income taxes that we
provided at estimated annual effective rates using assumptions as to earnings
and other factors that would affect the tax calculation for the remainder of the
year and to the operations of foreign branches and subsidiaries that were
subject to local income and withholding taxes.
PAGE 10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There are no material changes from the information provided in Item 7A of our
Annual Report on Form 10-K for the year ended December 31, 2001. For a
discussion of a change we implemented relating to our interest rate swap for our
term loan, see Note 3 to the Consolidated Financial Statements in this report.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) Oceaneering International, Inc. held its Annual Meeting of
Shareholders on June 7, 2002. The following matters were voted
upon at the Annual Meeting, with the voting results as
follows:
(1) Election of Class III Directors
Nominee Shares Voted For Votes Withheld
----------------- ---------------- --------------
T. Jay Collins 19,890,398 2,676,200
D. Michael Hughes 19,881,689 2,684,909
Messrs. Charles B. Evans, John R. Huff, David S. Hooker
and Harris J. Pappas also continued as directors
immediately following the Annual Meeting.
(2) Approval of the 2002 Incentive Plan
Broker
Shares Voted For Shares Voted Against Shares Abstaining Non-Votes
---------------- -------------------- ----------------- ---------
13,548,640 6,720,147 109,856 2,187,955
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Registration
or File Form or Report Exhibit
Number Report Date Number
------ ------ ---- ------
* 3.01 Restated Certificate of Incorporation 1-10945 10-K Dec. 2000 3.01
* 3.02 Amended and Restated By-Laws 1-10945 10-K Dec. 2001 3.02
10.01 2002 Incentive Plan
- ----------
* Indicates exhibit previously filed with the Securities and Exchange
Commission as indicated and incorporated herein by reference.
(b) Oceaneering filed the following reports on Form 8-K during the quarter
for which this report is filed.
Date Description
---- -----------
April 8, 2002 Information furnished under Item 9 regarding the posting of a presentation on
Oceaneering's Web site.
April 15, 2002 Information furnished under Item 9 regarding the posting of a presentation on
Oceaneering's Web site.
PAGE 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OCEANEERING INTERNATIONAL, INC.
(Registrant)
Date: July 31, 2002 By: /s/ JOHN R. HUFF
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John R. Huff
Chairman and Chief Executive Officer
Date: July 31, 2002 By: /s/ MARVIN J. MIGURA
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Marvin J. Migura
Senior Vice President and Chief Financial Officer
Date: July 31, 2002 By: /s/ JOHN L. ZACHARY
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John L. Zachary
Controller and Chief Accounting Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.01 2002 Incentive Plan